Good day to everyone who joined us and wants to meet new and interesting trading Forex strategies. Let me remind you, these strategies are based on one or several indicators derived from the usual technical analysis tools. Their modification (minor improvement) allows to amplify the signals from these instruments, providing the most precise entrance into the market. Today’s tool is based on the indicator of exponential moving average.
Indicator of moving average ТЕМА
ТЕМА – triple exponential moving average. The indicator, which compares favorably with classical MA that is almost not lagging behind the price movement. In other words, its signals can be interpreted with the understanding that the adopted decision will closely follow market trends. Also, the indicator allows you to determine the condition of the market, just separating the flat from the upward or downward movement.
Moving averages is one of the main tools of technical analysis, which is used both singly and in conjunction with other indicators. Indicator moving average is divided into 3 types:
- simple (SMA). Represents the arithmetic average of prices over certain periods. The calculation formula provides the addition of the prices for the previous periods and dividing the values by their number;
- exponential (EMA). This kind of sliding is calculated by a more complex formula that responds faster to price changes;
- weighted (WMA). Similarly with the exponential moving gives a more recent data value harder in comparison with the previous period.
The formula used for calculating the moving averages indicator can be used to create your own unique instrument.
- trading interval – 5 minutes;
- recommended currency pairs that strategy has already worked: EUR/USD, GBP/USD;
- parameters of ТЕМА indicator (EMA_period = 200);
- trading terminal – Metatrader 4.
The conditions for opening a buy trade: the price chart is going down, the trend has long been under the moving average indicator far from it relative to previous periods (see figure). As soon as the candle closes above the THEME, enter the market, setting a fixed stop loss of length 10-15 points.
Conditions for opening sell trade similar to purchasing. The price trend should be distinct, upward, and placed on top of the THEME. As soon as the candle closes below the indicator to open a short position.
Exiting the market is classic: don’t play with fate – we close 50% of the transaction to achieve a profit of 10 points, insured the remaining position at breakeven and let it go at trailing stop 5-10 points. From my experience, CNA is rarely in one direction more than 15 points, because it is better not to risk.
The advantage of the strategy is the almost complete absence of false signals. While it is understandable and easy to use for beginners. Indicator moving average is universal for almost all time intervals. Don’t be afraid to experiment and match tactics, good for you!